The euro debt crisis has not ended with Greece, in fact, one could say it has just started. In six months Ireland has become the second eurozone Member State to seek a EU bailout.

Ireland has been subject to pressure from the European Institutions and Member States particularly from Portugal and Spain into accepting a rescue package in order to stop “contagion” to other eurozone Member States, but the Irish government has initially insisted that it does not need financial assistance from the EU. Yielding to pressure or not, Ireland, on 21 November, submitted a formal request for a EU-IMF bailout. The EU finance ministers welcomed such request, they said, “providing assistance to Ireland is warranted to safeguard financial stability in the EU and in the euro area.”

The details of the aid package have been revealed on 28 November. Desperate to avoid market contagion, the Eurogroup and ECOFIN Ministers, unanimously, agreed to grant financial assistance to Ireland through a loan package. The EU financial support to Ireland would be provided on the basis of a three year joint EU/IMF financial assistance programme which has been negotiated with Ireland by the Commission and the IMF, in liaison with the ECB.

The bailout package amounts €85bn “including € 10 billion for immediate recapitalisation measures, € 25 billion on a contingency basis for banking system supports and € 50 billion covering budget financing needs.” The IMF is expected to contribute to one-third of it (€22.5bn) and Europe will contribute with €45bn. The UK (€3.8bn), Denmark ( €0.4bn) and Sweden (€0.6bn) will contribute to the €85bn through bilateral loan. Ireland will also contribute to the bailout with € 17.5 billion for “the banking support measures” which will be financed “through the Treasury cash buffer and investments of the National Pension Reserve Fund.”


The rescue package for Ireland was agreed under strict conditions attached. According to the Eurogroup and ECOFIN Ministers Statement “the EU and euro-area financial support will be provided under a strong policy programme.” The Irish four year austerity programme, presented on 24 November, is condition sine qua non for the bailout package. The Irish Government is required to achieve fiscal consolidation of €15 bn and to reduce its excessive deficit to 3 per cent of GDP by 2015. The policy conditions of the Irish bail out still have to be formally endorsed by the ECOFIN Council on 6-7 December. According to the European Commissioner for economic and monetary affairs, Olli Rehn, the average interest rate on loans from the EU is expected to be around 5.8 per cent.

Last May, in order to respond to escalating concerns on financial markets, the Euro zone leaders agreed to establish a European stabilization mechanism to prevent the Greek debt crisis from spreading to other countries. As they could not agree on the type of mechanism, they called for an emergency ECOFIN meeting to take place in less than 48 hours so that an agreement could be reached before the opening of the markets. The Commission had one day to come up with a proposal for a Regulation. Hence, aiming at restoring confidence in the financial markets and to help Member States facing financial difficulties, the Extraordinary Economic and Financial Affairs Council, on 9/10 May, agreed to establish a European Stabilisation Mechanism worth €500 billion. Such mechanism is based on Article 122.2 TFEU and on “an intergovernmental agreement of euro area Member States.” The European Financial Stabilisation Mechanism consists, therefore, of a fund of €750 billion, which is made up by €60 billion of emergency funds to be made available by the EU itself, by €440 billion to be made available in loan guarantees from eurozone Member States, and the IMF has indicated that it will contribute with €250 billion.

Such mechanism ignores the "no bailout" clause included in the Maastricht Treaty and today provide in Article 125 TFEU. According to Jean-Claude Juncker the mechanism "would not be a violation of the no-bailout clause […] since the loans are repayable and contain no element of subsidy…" However, the loans breaches the treaty’s provisions as Member States will became liable. The Treaty forbids Member States for being liable for the debts of another. Article 125 of the TFEU states “The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State (…)A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, (…)”

Member States must not forget what they have agreed at Maastricht. Germany feared at the time that by introducing a bailout mechanism would promote financial indiscipline. The rules were introduced to avoid situations as the present one whereas Euro zone Member States have been disregarding the SGP rules running large debts and deficit, threatening to default, weakening the euro, and now the other  Member States will pay for their debt. Pierre Lellouche, France’s Europe minister, has said to the Financial Times that the emergency stabilisation mechanism “It is expressly forbidden in the treaties by the famous no bail-out clause. De facto, we have changed the treaty.”

The Council adopted a regulation establishing a European financial stabilisation mechanism, which was, published OJEU on 12 May and it has entered into force on 13 May. According to the Council conclusions “the mechanism will stay in place as long as needed to safeguard financial stability” and it worth up to € 60 billion. It will apply to any Member State. The regulation is based on Article 122 (2) TFEU. However, this provision provides "Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the council of ministers, on a proposal from the European Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned.” It is important to stress that Article 122 (1) states “Without prejudice to any other procedures provided for in the Treaties (…).” Moreover, a declaration annexed to the Nice Treaty reads “The Conference recalls that decisions regarding financial assistance, such as are provided for in Article 100 (now Article 122) are compatible with the "no bail-out" rule laid down in Article 103 (now Article 125 (…)”

Article 1 of the abovementioned Regulation reads “With a view to preserving the financial stability of the European Union, this Regulation establishes the conditions and procedures under which Union financial assistance may be granted to a Member State which is experiencing, or is seriously threatened with, a severe economic or financial disturbance caused by exceptional occurrences beyond its control, taking into account the possible application of the existing facility providing medium-term financial assistance for non-euro-area Member States' balances of payments, as established by Regulation (EC) No 332/2002.”

The “difficulties caused by national disasters or exceptional occurrences beyond” a Member State control, foreseen in the Article, have now been broadly interpreted to be also caused “by a serious deterioration in the international economic and financial environment.” It is ludicrous to say that a debt crisis is beyond Member States control. Natural disasters are unforeseeable, however, we cannot say the same of debit crisis. Such argument is not clear at all, it is hard to understand how come the Greek, the Irish, the Portuguese, the Spanish crisis has been caused by "…exceptional occurrences beyond [their] control …" Such broad interpretation breaches the spirit of the Maastricht treaty. This provision can be ultimately interpreted by the ECJ.

Using Article 122 to set up the European stabilisation mechanism meant that Britain was unable to veto such proposal as it was decided by Qualified Majority Voting. In fact, the UK had no said in the creation of such mechanism as it was discussed one day before, behind closed doors, at the Euro zone leaders meeting. Alistair Darling who, one could argue, had no mandate for it, represented the UK.

Under Article 3 of the Regulation, the Member State applying for the EU financial assistance would have to discuss with the Commission and the European Central Bank its financial needs and present “a draft economic and financial adjustment programme” to the Commission. Then the Council, acting by a qualified majority on a proposal from the Commission, will decide to grant financial assistance, which will take the form “of a loan or of a credit line granted to the Member State concerned.” Such loans would be disbursed in instalments.

The regulation provides that “Strong economic policy conditions should be imposed in case of activation of this mechanism” which would be defined by the Commission, in consultation with the ECB. The beneficiary Member State’s “adjustment programme” would have to be approved by the European Commission before the EU financial assistance can be granted. Once the Council decides on a loan, the Commission would be authorized to borrow on the capital markets or from financial institutions.

The European stabilisation mechanism includes an aid facility to balance of payments. The EU leaders, at Maastricht, have not foreseen that balance-of-payments problems could happen in a common monetary union hence, since 1999, the Euro zone Member States are no longer qualified for medium-term financial assistance. Even though Article 143 TFEU expressly provides for such assistance solely to Member States outside the euro area, the Council has extended the balance of payments facility to Euro area Member States using Article 122 (2) as legal basis. Brussels went much beyond the powers conferred by the treaties to provide a legal basis for the emergency funding.

The ceiling set in the Council Regulation establishing a facility providing medium-term financial assistance for Member States' balances of payments, has been recently increased to €50 billion but now it has been extended by €60bn, being, therefore, increase to a total of €110bn. Taking into account that around €15bn have been lend to Hungary, Latvia and Romania, €95bn is now available not just to non-eurozone but to all EU Member States.

The European stabilisation mechanism is therefore a violation of the non-bailout clause and a misuse of Article 122 (2), which is meant for national disasters. The plan has fiscal implications for all EU countries, including the UK.

The European Commission “is empowered on behalf of the European Union to contract borrowings on the capital markets” up to €60 billion, using the EU's annual budget as collateral. The amount of loans would be limited to the margin available under the own resources ceiling for payment appropriations of the EU budget. Hence, all EU Member States who are jointly liable for any payments due on these bonds. Consequently, if a beneficiary country fails to pay back the loan, all 27 EU Member States would have to pay into the EU budget to cover the default, as a result, British taxpayers would be liable for over 10% of it.

Last June, the eurozone Member States also finalised the last technical details of their €440 billion “Special Purpose Vehicle”, which will expire in three years, on June 30th 2013, to bail out a Euro zone Member State at serious risk of defaulting on its public debt. The European Financial Stability Facility (EFSF) takes the form of a limited liability company under Luxembourg law. The 16 eurozone countries have, therefore, agreed on the Articles of Association of the EFSF and on the Framework Agreement between euro area Member States and the EFSF.

All euro zone Member States have signed the EFSF Framework Agreement. According to the Framework Agreement the “financial support to euro-area Member States shall be provided by EFSF in conjunction with the IMF.” The Euro zone countries obligation to issue guarantees for the EFSF debt instruments has entered into force in August where the required national parliamentary procedures have been completed in Member States, representing 90% of shareholding.

The EFSF aim is “to preserve financial stability of Europe’s monetary union by providing temporary financial assistance to euro area Member States in difficulty.” The EFSG purpose is to gather funds and provide loans together with the IMF, subject to strict conditionality, to euro area Member States. Hence, the financial assistance to euro-area Member States will take the form of loan facility agreements and loans. One could wonder if the EFSF is not a step towards a “Eurobond” whereby eurozone issues common public debt.

With the support of the German Debt Management Office (DMO) the EFSF can issue bonds or other debt instruments on the market to raise the necessary funds to provide loans to eurozone Member States in financial difficulties, which are then “backed by irrevocable and unconditional guarantees of the euro-area Member States.” Each euro-area Member State is the guarantor of funding instruments issued or entered into by EFSF, with the exception of any euro-area Member State which has applied “for stability support from the euro-area Member States or which benefits from financial support under a similar programme or which is already a Stepping-Out Guarantor.”

The Euro zone Member States “will provide guarantees for EFSF issuance up to a total of € 440 billion on a pro rata basis.” The eurozone Member States shareholding in the EFSF corresponds to their respective share in the paid-up capital of the ECB. Hence, Germany guarantee commitments amount 119,390.07, France 89,657.45, Italy 78,784.72, Spain 52,352.51, Netherlands 25,143.58, Belgium 15,292.18, Austria 12,241.43, Portugal 11,035.38, Greece 12,387.70, Finland 7,905.20, Ireland 7,002.40, Slovenia 2,072.92, Slovakia 4,371.54, Cyprus 863.09, Luxembourg 1,101.39 and Malta 398.44.

The main controversial issue was to agree on the share of the liability for the facility’s debt. Whereas Germany would prefer each Member State to be liable for its share of the guarantees France favoured a share liability. The Eurozone finance Ministers have reached a compromise deal, they agreed on several measures aiming at ensuring the best possible credit rating for the debt instruments issued by EFSF (triple A credit rating for the EFSF bonds), “a 120% guarantee of each Member State's pro rata share for each individual bond issue” as well as “the constitution, when loans are made, of a cash reserve to provide an additional cushion or cash buffer for the operation of the EFSF.”

The lending by EFSF can only be activated after a support request made by a euro area Member State, which is unable to borrow on markets at acceptable rates. Then, the Commission is authorized to negotiate and sign a Memorandum of Understanding (MoU) on behalf of the euro-area Member States with the Member State concerned. The Eurogroup Working Group must approve the MoU. If there is already an MoU between the Member State concerned and the Commission under the EFSM which has been approved by all euro-area Member States, it will apply if it covers both EFSM and EFSF stability support. The MoU will establish strict policy conditions for the financial assistance. Once the MoU is approved, the Commission will present a proposal to the Eurogroup Working Group of the main terms of the Loan Facility Agreement to be proposed to the Member State concerned. After a decision of the Eurogroup Working Group, EFSF negotiates the terms of the Loan Facility Agreements under which Loans will be made available to the Member State concerned. Subject to prior unanimous approval by all guarantors, the guarantors authorise, therefore, EFSF to sign such loan facility agreements.

The eurozone Member States agree that EFSF is authorised to negotiate the terms on which it may issue or enter into funding instruments “on a stand-alone basis or pursuant to a debt issuance programme or programmes or facility to finance the making of Loans to Borrowers.” Each Guarantor is therefore required to “issue an irrevocable and unconditional Guarantee in a form to be approved by the Guarantors.” The guarantors’ decision to issue guarantees in connection with an EFSF Programme or a stand-alone issue of or entry into Funding Instruments must be taken unanimously. The framework agreement provides “The Guarantee Commitment of each Guarantor to provide Guarantees is irrevocable and firm and binding” and that “Each Guarantor will be required, subject to the terms of this Agreement, to issue Guarantees up to its Guarantee Commitment for the amounts to be determined by EFSF and at the dates specified by EFSF in order to facilitate the issuance or entry into of Funding Instruments under the relevant EFSF Programme or stand-alone Funding Instrument.”

The Commission will present a report to the Eurogroup Working Group, before each disbursement of a Loan under a Loan Facility Agreement, evaluating compliance by the concerned Member State with the terms and the conditions established in the MoU. Then Guarantors will unanimously decide on whether to allow disbursement of the relevant Loan. The first Loan to be made available to the Member State concerned under a Loan Facility Agreement is released after the initial signature of the MoU and consequently is not subject to such a report.

Decisions concerning the maximum amount of a loan, its duration, as well as the number of instalments to be disbursed must be taken by the finance ministers of the eurozone Member States unanimously.

The framework agreement provides that the credit enhancement for the EFSF Programme includes the guarantees and points it out that “the participation of each Guarantor in issuing Guarantees shall be made on the basis of the Adjusted Contribution Key Percentage and that the Guarantee issued by each Guarantor is for 120% of its Adjusted Contribution Key Percentage of the amounts of the relevant Funding Instruments” and the cash reserve which will act as a “cash buffer.” If the concerned Member State delays or does not provide a payment under a Loan there will be a shortfall in funds available, to pay a scheduled payment of interest or a scheduled payment of principal. In this case the EFSF will, firstly, “demand on a pro rata pari passu basis on the Guarantors which have guaranteed such Funding Instrument up to 120% of their respective Adjusted Contribution Key Percentage of the amount due but unpaid”, then, if this does not fully cover the shortfall, it will release an amount from the Cash Reserve. The euro-area Member States may unanimously decide to approve and adopt other “credit enhancement mechanisms.”

The EFSF is liable to reimburse each Guarantor as regards any claim paid in respect of a Guarantee but such “obligation is subject to and limited to the extent of funds actually received from the underlying Borrowers in respect of the Loans which gave rise to a shortfall of funds.” Hence, if a eurozone Member State default on its payments, guarantees would be demanded from the guarantors and payments might be made from the cash buffer. If a guarantor is unable to provide its guarantees, the other eurozone Member States would have to cover the shortfall by increasing their guarantees.

As abovementioned, the Irish bailout package has been disclosed and it will amount €85bn, taking into account that Ireland itself will contribute with €17.5bn, the external support amounts €67.5bn, with €45.0bn coming from EU. The EU finance ministers have decided the EU financial assistance to the Irish bailout, whilst €22.5bn will come from the European financial stabilization mechanism (EFSM), €17.7bn will come from the European financial stability facility (EFSF) and €4.8bn from bilateral loans from the UK, Sweden and Denmark.

According to the European Voice EU officials have said that the Irish bailout will come from the two funds “so that the €60bn in the EFSM are not exhausted.” However, as Bill Cash pointed out “The European facility which is only for the eurozone has 440bn euros which could solve the Irish problem on its own” and “can be used without infringing either UK liability or sovereignty.” In the other hand, “The Darling guarantee mechanism with qualified majority voting involves, unnecessarily, both UK liability and sovereignty.”

At least the contribution from the EFSF, which does not entail the UK participation could have been bigger but it is the other way around, more money will come from the EFSM. The UK will, therefore, contribute to the Irish bail out in all fronts: as a member of the IMF, being part of the EFSM (€2.5bn) and with extra bilateral loan (€3.8bn). Britain’s contribution to the Irish bailout has been estimated around £7billion, which according to George Osborne is in Britain's 'national interest'. As Bill Cash said 'It is in our national interest to help the Irish but not through this Euro framework.” Moreover, he noted “What therefore is the point of an opt-out on this? We are being trapped into a situation of more Europe, not less.” According to Bill Cash, British economy cannot be restored without repatriating powers from Brussels. In fact, he has recently said to George Osborne “What we need is repatriation and deregulation to help small businesses and growth.”

The Council, acting by a qualified majority on a proposal from the Commission decides to grant financial assistance, under European financial stabilization mechanism. Hence, the emergency funds from the €60 billion pot are easier to release as just QMV is required, consequently the UK cannot veto it. Such facility is guaranteed by the EU budget and all EU Member States, including the UK, are jointly liable for any payments due. Hence, if a beneficiary country fails to pay back the loan, all 27 EU Member States would have to pay into the EU budget to cover the default. The UK is not part of the eurozone but even so is trapped in this mechanism, as it is required to contribute to it. Having Article 122(2) as the legal basis, the UK would be required to contribute to a eurozone bailout on the basis of the qualified majority voting system. British taxpayers might be asked to pay for other eurozone bailouts.

In the other hand, in order to release funds from the European financial stability facility an unanimous decision by the eurozone Member States is required. Moreover, the loan guarantees are provided just by eurozone Member States. Each eurozone Member States is only responsible for its share of the guarantee, hence they are not jointly liable as in the other facility.

The Commission has not put forward yet any proposal but it seems that the Eurogroup and Council will adopt both decisions on 6 and 7 December.

It is important to recall that the constitutionality of the European financial stability facility has been challenged in the German Constitutional Court. There is a complaint that Germany's participation in the EFSF is illegal. Peter Gauweiler, CSU MP, has challenged the mechanism as not being in line with the European primary law, particularly with the TFEU's "no bailout" clause and German Constitution. The Constitutional Court has not ruled yet on the legality of the financial assistance, but Mr Gauweiler said "I am confident that we will be successful with our constitutional complaint against the unconstitutional rescue plan, going by the merits of the case, and that the Constitutional Court will stop the transformation of the European Monetary Union into a liability and transfer union, triggered by the rescue packages." If that is the case, Germany won't be able to participate on the financial mechanism, consequently where the money will come from? Moreover, if the German Constitutional Court declares that the mechanism is illegal, Brussels can no longer turn a blind eye on the issue.

One could wonder why Angela Merkel has been saying since last March that the Lisbon Treaty should be amended. The €440bn European Financial Stability Facility will expire in June 2013 and there will be national elections in Germany in October 2013. The German taxpayers are the biggest contributors to the EU financial aid facilities. Ms Merkel has made clear that Germany will not extend the three-year period of the €440bn eurozone rescue package. She has been calling for the treaty to be amended, to set up a permanent eurozone stability mechanism to replace the temporary facility because she fears that any extension of this mechanism would be legally challenged in the German Constitutional Court. She wants to set up a “procedure for the orderly insolvency of a [eurozone] Member State.” Germany is pressing to set conditions that private investors must be involved in accepting more risk for sovereign debt issued after 2013. In fact, France and Germany have recently agreed that the Treaties should be amended to provide this.

It is important to recall that, last October, the EU leaders agreed to amend the Treaty providing it is a “limited” change in order to allow the creation of a permanent crisis mechanism that will replace the 440 billion euro European Financial Stability Facility. The European Council wants therefore to avoid long negotiations among the Member States and between the Member States and with the European Parliament. They want to avoid, therefore, an IGC whereby Member States, could come up with several amendments to the treaties. In this way the UK would not be able to ask for repatriation of powers. Moreover, and the main reason, of the so called “ limited treaty amendment” is to avoid referenda in certain Member States.

Article 48 (6) allows Treaty amendments to be made without the necessity of a new, amending treaty and ratification. It allows for the revisions of text, within Part III, "on internal policies and actions of the Union." Under this "special revision procedure," the treaty can be amended solely by European Council, as long as there is unanimity and the amendments do not extend the competences of the European Union. Such decision shall not enter into force until it is approved by the Member States in accordance with their "respective constitutional requirements” however this is not the same as Treaty ratification. It would not require ratification in some Member States and it would be possible to avoid referenda.

The European Council conclusions state that Article 125 TFEU, the "no bail-out" clause will not be modified. Obviously, such amendment would require without any doubt an ordinary revision procedure of the treaties. It seems they are planning to amend Article 122. Under the existing treaties there is no such mechanism to help out a eurozone Member State through loans and grants, therefore they must amend the treaties if they want to, legally, bailout eurozone countries. However, it is hard to understand how come they are intending to create a permanent crisis mechanism “to safeguard the financial stability of the euro area as a whole” without amending the bail out rule. It seems that any amendment to Article 122 in this regard would be incompatible with Article 125 as well as any derogation from Article 125 will be incompatible with the principles of the EMU.

The European Council has given a mandate to Herman Van Rompuy to come up with the proposals on a “limited treaty change.” The European Commission and Van Rompuy were supposed to present their proposals to the European Council in December. However, Angela Markel’s comments that private investors would share the costs of any future debt bailout under the future permanent mechanism have caused turmoil in the markets. In fact, Angela Markel’s comments and the vagueness on the details of a permanent crisis mechanism has aggravated the eurozone situation, particularly Ireland.

In order to calm down the markets the Eurozone finance ministers have decided to clarify the role of the private sector in such mechanism. Hence, they decide not to wait for the Van Rompuy and Commission’s proposal expected in December. Unsurprisingly, Angela Merkel and Nicholas Sarkozy agreed on the permanent crisis mechanism – the European Stability Mechanism with Herman Van Rompuy, President of the European Council, José Manuel Barroso, the President of the European Commission and Jean-Claude Juncker, Eurogroup Chairman. Then, Germany and France proposal outlining the creation of a permanent crisis-resolution mechanism and how private creditors would be involved, was endorsed on 28 November, in a statement, by the Eurogroup.

The Eurogroup Ministers agreed, therefore, on the European Stability Mechanism (ESM) which “will be based on the European Financial Stability Facility capable of providing financial assistance packages to euro area Member States under strict conditionality functioning according to the rules of the current EFSF.” According to the Eurogroup statement the “Rules will be adapted to provide for a case by case participation of private sector creditors, fully consistent with IMF policies.” The participation of private investors on any future eurozone bailout would be, therefore, decided on “a case by case” basis and not through an automatic mechanism. Hence, they would not automatically share the costs of restructuring of a euro zone Member State’s sovereign debt.

The Eurogroup ministers agreed that assistance from the so-called European Stability Mechanism (ESM) to a eurozone Member State “will be based on a stringent programme of economic and fiscal adjustment and on a rigorous debt sustainability analysis conducted by the European Commission and the IMF, in liaison with the ECB.” Such decision on providing assistance would be taken by the Eurogroup Ministers unanimously. If a country is considered solvent by the Commission, the IMF and the ECB “the private sector creditors would be encouraged to maintain their exposure according to international rules and fully in line with the IMF practices.”

However, if a country is considered to be insolvent it would have “to negotiate a comprehensive restructuring plan with its private sector creditors, in line with IMF practices with a view to restoring debt sustainability.” Then, “If debt sustainability can be reached through these measures, the ESM may provide liquidity assistance.” Private creditors would participate in future eurozone debt restructuring by collective action clauses annexed to eurozone government bonds issued after 2013. The Eurogroup ministers also agreed that “In order to facilitate this process … collective action clauses (CACs) will be included, in such a way as to preserve market liquidity, in the terms and conditions of all new euro area government bonds starting in June 2013.” According to the Eurogroup ministers “This would enable the creditors to pass a qualified majority decision agreeing a legally binding change to the terms of payment (standstill, extension of the maturity, interest-rate cut and/or haircut) in the event that the debtor is unable to pay.”

The Eurozone ministers reiterated that “any private sector involvement based on these terms and conditions would not be effective before mid-2013” when the exiting €440 European Financial Stability Facility (EFSF), expires.

The nature of the treaty amendment is not known yet. The European Commission and Van Rompuy will present their concrete proposals to the European Council in December. The president of the European Council welcomed the Eurogroup’s statement and stressed that his proposal “on limited Treaty change will reflect (their) decision.” The European Council will discuss this issue again at its December meeting with the aim of “taking the final decision both on the outline of a crisis mechanism and on a limited treaty amendment so that any change can be ratified at the latest by mid-2013.” It seems that the plan is to reach a “final decision” on the treaty amendment at the next European Council in December.

Even if there is a greater involvement of the private sector and IMF in the new permanent crisis mechanism, Member States would still contribute for the costs of a sovereign debt rescheduling with eurozone Member States. Moreover, it is important to stress that simplified revision procedures is only possible if the European Council decision to amend the treaty does not “increase the competences conferred on the Union in the treaties.” The concrete details of a permanent crisis mechanism are not known yet but it is hard to believe that such mechanism would not further increase the Union competences. It seems obvious that such mechanism would entail further transfer of powers to Brussels namely further political and fiscal cooperation. Hence, if there is transfer of powers from Member States to the EU, the so-called “limited treaty amendment” cannot be adopted under Article 48 (6). Consequently, such amendment cannot be introduced without approval in a national referendum in certain Member States.

The European Stability Mechanism is just for Eurozone Member States therefore the UK will not participate. However, the future crisis mechanism will only be effective from 2013, consequently until this happen the UK will contribute to any Eurozone bailout through the European financial stabilization mechanism as abovementioned.

The financial markets have lost confidence in the euro and in governments’ ability to repay their debts and it seems that the EU financial aid mechanisms and austerity packages won’t bring it back. José Manuel Barroso said that the agreement on the stability package “will ensure that any attempt to weaken the stability of the euro will fail…” However, the euro crisis has not stopped with the Greece’s bailout and it won’t stop with the Irish. The worries over the possibility of Greece and Ireland debit crisis to spread to other eurozone countries have continued. It was thought that the Irish bailout as well as the Eurogroup’s statement on the permanent crisis mechanism would prevent a sovereign debt contagion to other eurozone countries however it has not calmed down the markets. Portugal, Spain, particularly Portugal, is very likely to follow Greece and Ireland asking for a bailout. Moreover, there also concerns over Belgium and Italy which have also been seeing a rise in borrowing costs.

According to Reuters, Mark Grant, managing director of corporate syndicate and structured debt products at Southwest Securities in Florida said "I think it is almost impossible now to stop the contagion," Moreover, he stressed that "If Ireland is dealt with, it will not be solved and then bond owners will turn their attention to Portugal, Spain, Italy, Belgium et al as the monetary union is full of structural defects."

According to the European Commission “The volume of the EFSF, together with the EFSM and the IMF, is large enough to provide temporary liquidity assistance to several Member States of the euro area.” There are doubts whether the existing Brussels financial aid mechanisms are enough to save the more vulnerable euro zone Member States. Herman Van Rompuy has said "And if the plan were to prove insufficient, my answer is simple: in this case, we'll do more." According to Axel Weber, Bundesbank President, the rescue funds should be enough but “If it's not enough, then one will have to increase this commitment," One could wonder how much more the richest Member States are willing to pay? What the taxpayers of those countries would say? Unsurprisingly, the German Government has immediately denied that there are plans to increase the European financial stability facility. However, it has been reported that the EU rescue funds won’t be enough if Spain asks for a bailout.

The Euro and the EMU represent a serious limitation to the sovereignty of the States of the Euro zone which have ceded to the EU the monetary and exchange policy, and put in cause a prerogative of a sovereign State along with the taxes – the capacity to print money. The governments have lost the capacity to use the exchange rate policies to answer to external shocks or to control the trade balance and they have lost seigniorage rights. Because they are stuck in the euro those Member States can no longer deal with economic imbalances by means of devaluation. Greece, Ireland, Portugal and Spain are in the euro straitjacket, unable, therefore to respond flexibly to events such as the present crisis. In the other hand, by asking for a bailout they are giving on a tray to Brussels what last remains of their financial sovereignty.

The Euro is one of the main federalist elements and as such a fundamental political project of the “European construction.” However, the Eurozone has learnt the hard way that the Euro and the common monetary policy do not work.

According to Transatlantic Trends, a survey published last September by the German Marshall Fund of the United States, around 60 percent of the French, and more than half of Germans, Spanish and Portuguese said that the euro was "a bad thing for their economy.”

The European Council President, Herman Van Rompuy said "we must all work together in order to survive with the eurozone, because if we do not survive with the eurozone, we will not survive with the European Union." According to Euractiv, Ivan Mikloš, Slovakia's finance minister said “… the risk of a euro zone break-up, or at least its very problematic functioning, is very real…” In the other hand, according to the EuropeanVoice, Klaus Regling, the head of the European Financial Stability Facility (EFSF) said "There is zero danger. It is inconceivable that the euro fails." It remains to be seen whether the euro will survive, but one could say that one size fits all approach won’t last forever. Howard Wheeldon has questioned “are we witnessing the early stages of a break down of the Euro and indeed, possibly the European Union as well?” and he also replied “Chances are that we really are!”